What Are The Foreclosure Procedures And Process

The government’s position with lending, traditionally, is they are set to ensure there is a warehouse for lending on the secondary, and that there are programs available for low to moderate-income families, as well as low to moderate-income areas.

Many states have strict foreclosure rules.

The time period for foreclosure procedures differs from state to state.

For these reasons keep the following three things in mind:

How Long Does Foreclosure Process Take

The Foreclosure Process is a long process and does not happen overnight.

• The good news is those home buyers can qualify for home loans after the foreclosure process
• In order to qualify for mortgage loans after the foreclosure process, the foreclosure needs to have been finalized
• There are waiting period after foreclosure and/or another housing event with government loans and conventional loans
• However, Gustan Cho Associates is a national lender with no lender overlays on government and conventional loans
• Gustan Cho Associates has a special alternative financing loan program called NON-QM Loans
• There is no waiting period after foreclosure, deed in lieu of foreclosure, short-sale with non-QM loans
• Home Buyers can qualify for NON-QM Loans one day after foreclosure. 20% down payment is required

Non-QM loans have mortgage rates that are higher than government and conventional loans.

How Does The Foreclosure Process Work?

When a homeowner cannot make his or her mortgage payments and defaults on his or her agreement to make timely mortgage payments, a foreclosure will occur and the foreclosure process will be initiated by the lender.

• The ultimate outcome from the foreclosure process is the subject property being taken over by the mortgage lender and sold
• Most Lenders do not want to take the property back 

Depending on the lender, they may offer the homeowner the following:

• Short Sale
• Deed In Lieu Of Foreclosure
• Loan Modification

Foreclosure Process and Proceeding will not start until the borrower is 120 days behind their mortgage payments.

First Stage Of Foreclosure Process

The foreclosure process takes months if not over a year. Possibly years depending on the geographical region the property is located and the laws of the state of the subject property. It also depends on the mortgage lender.

• When a borrower falls behind on their mortgage payment and cannot come into a repayment plan with their lender, the lender will initiate foreclosure proceedings
• This normally does not happen unless the homeowner is at least four or more months behind
• The lender will give the homeowner an opportunity to pay the payments that have been behind
• The lender may offer the homeowner to enter into a payment plan
• Homeowners can negotiate with their lenders and make payment arrangements

However, for those homeowners who have lost their businesses or lost their jobs and cannot gain employment and have no family members to bail them out, their options are limited.

Foreclosure Timeline

For those homeowners that cannot enter into a repayment agreement with the lender, the mortgage lender will start the foreclosure process.

• The first stage of the foreclosure process happens if the homeowner has missed at least four monthly payments
• Sometimes the foreclosure process is not initiated until six or more months after the first missed payment
• The lender will request the appointment of a trustee to record a NOD, which is a Notice of Default
• This is recorded at the County Recorder of Deeds Office in which the subject property is located at
• The foreclosure process will give the homeowner notice once this is filed and this is when the official reinstatement period starts

The reinstatement period normally is good until a week or so prior to the subject property being auctioned off at a sheriff’s sale.

Foreclosure Proceedings

In the event, if the mortgage default is not brought current within three months, the courts will issue a foreclosure date for the sale of the subject property.

• The borrower will be receiving a notice of sale notice

The notice of sale notice will also be posted on the subject property and will eventually be published in various local newspapers for a period of several weeks.

Trustee Sale During Foreclosure Process

A designated date, time, and location will be published through the publication of the notice of sale for the foreclosure trustee sale.  It is normally held at a county site where the subject property is located at.

• The sale is an auction and will be auctioned off as a public auction and offered to the highest bidder
• The winning bidder needs to have a certain percentage of cash down payment and needs to come up with the balance within the next 24 or 48 hours or he or she will lose the initial cash deposit

The winning property bidder will then get the rights and ownership of the foreclosed property via trustees deed to the foreclosed property.

Foreclosure Bidding Auction Process Of Subject Property

The opening bid price for the subject property is set by the mortgage lender who owns the foreclosed property.

• The opening bid is normally the balance of the mortgage balance of the subject property along with the accrued interest, attorney costs, and other fees the mortgage lender has accrued
• In the event, if there are no bidders for the property, the property will be bought by the lender’s representative which is normally an attorney
• Many times, the lender will purchase the property back and will hold it as their asset for future resale
• This is often called Real Estate Owned, often referred to as an REO property
• When a foreclosed property is auctioned off at the sheriff’s sale whether, by a public bidder or the lender, all secondary and junior liens are expunged

For those purchasing Real Estate Owned properties, REO, by a lender, will get a clean title to the property with no secondary or junior liens attached to the title.

Situations Where Homeowners Go Into Foreclosure

There are hundreds of examples where homeowners face pending foreclosure.

• Some of the common situations are when a homeowner loses his or her business or job or a demotion from their current job
• Many employers have made full-timers into part-timers too due to the Great Recession
• An unexpected prolonged illness is another common reason
• Illness or medical issues where homeowners are hospitalized and cannot work due to their medical situation or illness stops the flow of regular income
• Other cases are when the working spouse dies
• The household cannot afford to make the monthly housing payment due to the drop in income or no income
• Divorce is another common reason where homeowners not just face foreclosure but also are forced into bankruptcy
• Excessive credit obligations and unexpected major housing repairs can set any homeowner back

Can make them fall behind on their mortgage payment as well.

Alternatives To Avoid Foreclosure

Lenders do not want to be property owners and the last thing they want is the home.

• They will work with homeowners to avoid foreclosure
• Many mortgage lenders have a work out department where they have departments specifically assigned to work with homeowners in distress
• The first thing distressed homeowners should do if they anticipate future problems in paying mortgage payments is contact lender before falling behind
• Homeowners who are current on mortgage payments but anticipate hardship in the near future should contact their lender
• Most lenders are more likely to work with them while they are current with mortgage payment before borrower goes in arrears
• Borrowers who have a temporary situation where they just got laid off and can find employment in a month or two, the lender might offer a short term forbearance agreement
• Short term payment agreements can be offered to borrowers with a three to six-month reprieve
• Lenders can work out a repayment plan or add the arrears to the back of mortgage balance

In the event, if the homeowner has plenty of equity in their home, the lender might offer to add the missed payments to the balance of mortgage loan.

Loan Modification And Mortgage Loan Workout

A loan modification is where a lender will restructure the current loan so the borrower is able to pay their monthly housing payments with no struggle. Many lenders will want to know the finances of the homeowner before entertaining a loan modification. Lenders can structure it by forgiving some of the balance owed or lowering the mortgage rate to reduce monthly mortgage payment so it can be an affordable payment. Loan Modifications are only available to homeowners who have documented full-time verifiable income.

• This normally happens when borrowers are upside down on their home where mortgage balance is higher than the value of the home
• The lender can also do a partial claim
• They can make a separate note to borrowers like a second mortgage to make the missed back mortgage payment

Borrowers will have options if they contact mortgage lender early enough prior to being late.

Advice On Stopping Foreclosure Process

Homeowners who do not contact their mortgage lender and avoid talking to them hoping that their financial situation will get better may be too late in stopping foreclosure process:

• If the lender does file a notice of default, it might be too late in stopping foreclosure process

Most lenders are reluctant to work with a homeowner who is in default and well into the foreclosure process because their options may be limited.

Alternatives To Stopping Foreclosure Process: Sell, Short Sale, Deed In Lieu

A homeowner facing foreclosure should not procrastinate and act on ways of avoiding foreclosure, whether it is contacting their lender or trying to sell their home.

• Contact a realtor in the area and get market analysis to find out the value of the home
• If the home is upside down where homeowners owe more on mortgage balance than the value of the property, see if the lender is willing to accept a short sale
• Need permission by the lender to sell the home below the price of what is owed on the mortgage balance

Another alternative to foreclosure is a deed in lieu of foreclosure where the mortgage lender is willing to accept the keys of home and avoid a deficiency judgment in lieu of foreclosure.

Filing Bankruptcy To Stopping Foreclosure Process

Filing Bankruptcy is one way of stopping the foreclosure process. There are two types of bankruptcies:

1. Chapter 7 Bankruptcy
2. Chapter 13 Bankruptcy

Homeowners contemplating filing bankruptcy to save their homes should consult with a bankruptcy attorney who is experienced in real estate law.

NON-QM Loans Require No Waiting Period After Bankruptcy And Foreclosure

Home Buyers can qualify for non-qm loans with no waiting period after the following:

• Foreclosure
• Deed In Lieu Of Foreclosure
• Short Sale

20% down payment is required and mortgage rates are higher on non-qm loans. Alternative Financing such as non-QM loans and/or bank statement mortgage loans for self-employed borrowers is a great program to use it as a bridge loan until borrowers qualify for traditional financing such as FHA, VA, USDA, and Conventional Loans.

Qualifying For Mortgage After Foreclosure With NO Waiting Period After Housing Event

Home Buyers can qualify for mortgage home loans after the following:

• Foreclosure
• Deed In Lieu Of Foreclosure
• Short Sale
• Loan Modification

There is a mandatory waiting period to qualify for government and conventional loans after bankruptcy and housing event.

• However, NON-QM Loans are portfolio loans offered by Gustan Cho Associates with no waiting period after foreclosure, deed in lieu of foreclosure, and short sale
• There is a one-year waiting period to qualify for NON-QM Loans after Chapter 7 Bankruptcy discharged date
• NON-QM Loans require 10% to 20% down payment
• Mortgage Rates are higher than government and conventional loans
• NON-QM Loans are normally used as bridge loans until borrowers qualify for traditional government and conventional loans

Home Buyers who have a foreclosure or other housing event and need to qualify for a home loan with a direct lender with no overlays, please contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.